Analysts expect poor third quarter for AirAsia and MAS

PETALING JAYA: Both AirAsia Bhd and Malaysia Airlines (MAS) are not expected to report significant improvements to their financial performance in the third quarter, owing to the high cost of jet fuel, according to research analysts.

“It should be another bad quarter for MAS. AirAsia is also not likely to see stellar results,” said a bank-backed analyst.

He said that while the third quarter was seasonally a better period for MAS, it would be impacted by the high cost of jet fuel and also lower demand from full-service carrier passengers against a gloomy outlook for the global economy.

“We foresee further capacity cuts by MAS, notably on the domestic and Asean routes, given lower demand for full service travel,” said OSK Research in a report last month.

Both AirAsia and MAS had noted in their second-quarter reports, via Bursa Malaysia filings, that the outlook for the second half of 2011 would be challenging due to high jet fuel cost.

MAS recorded a net loss of RM769mil for the first half of the year, which was more than triple its net loss of RM224.68mil a year earlier. It also attributed its RM526.68mil net loss in the second quarter to higher fuel cost.

MAS suffered a second-quarter loss despite its total operating revenue increasing by 8.5% year-on-year to RM3.43bil.

“In response to the tough operating environment, MAS is moderating its short-term capacity growth,” the carrier said in August.

MAS added that other measures such as the implementation of fuel surcharges and improvement of its revenue management were expected to yield some benefits in the second half of 2011 but would not be adequate to offset the impact of high jet fuel price.

Meanwhile, AirAsia's net profit of RM276.2mil for the first half of the year represented a 34.7% dip compared with the RM423mil net profit a year earlier.

AirAsia's second-quarter net profit of RM104.3mil represented a 47.6% drop year-on-year.

The budget carrier suffered a dip in second-quarter profit despite its revenue increasing by 15.2% year-on-year to RM1.1bil.

“The introduction of a fuel surcharge during the second quarter is expected to mitigate, but not fully offset, the effect of higher fuel prices during the second half of the year,” AirAsia said.

Affin Investment Bank said in a report that third-quarter figures for AirAsia would be flat on a quarter-on-quarter basis but higher year-on-year, based on the budget carrier's July to September operating statistics.

The report noted that in the third quarter, AirAsia carried 4.3 million passengers, which was 3% lower quarter-on-quarter but 7.6% higher year-on-year.

“AirAsia's improvement in operating statistics would be partially offset by the spike in jet fuel prices. In the third quarter, the average jet fuel price was US$125 (RM391) per barrel, some 45% higher than the US$87 (RM272) per barrel average a year earlier,” the report said.

It also said its 2011 passenger growth forecast of 12% to 18 million was achievable as the October to December period was seasonally the strongest quarter due to the festive and holiday season.

“In addition, the collaboration with MAS, coupled with the potential re-branding of Firefly as a premium short-haul carrier, will reduce the fierce competition between the two airlines, and this is supportive of demand and yield,” the report said.

HDBSVR sees KLCI testing 1,475

KUALA LUMPUR (Nov 3): Hwang DBS Vickers Research (HDBSVR) said the steadier overnight close on Wall Street may lift share prices on Bursa Malaysia on Thursday.

The benchmark FBM KLCI will probably rise to challenge the immediate resistance level of 1,475 ahead, it said.

HDBSVR said overnight, major equity indices on Wall Street rebounded between 1.3% and 1.6% overnight, boosted by stronger US economic fundamentals.

According to the U.S. Federal Open Market Committee, the U.S. economy had strengthened in 3Q11 but there remain significant downside risks to the outlook, which prompted the policymakers to indicate that they are ready to employ new tools if required to promote a stronger economic recovery.

At Bursa Malaysia, it said the steadier external backdrop may lift share prices on Bursa.

HDBSVR said one counter that is expected to be in the limelight today is Parkson Holdings. The listing of its subsidiary Parkson Retail Asia in Singapore this morning could set a new valuation benchmark for the Malaysian-listed parent going forward.

CIMB Research has technical sell on JCY

KUALA LUMPUR (Nov 3): CIMB Equities Research has a technical sell on JCY International at 60 sen at which it is trading at a FY12 price-to-earnings of 8.8 times and price-to-book value of 1.4 times.

It said on Thursday the recent sharp rebound has taken JCY back up towards its 200-day SMA and it appears to be finding some difficulty in breaching it. Two out of the last three candles had long upper shadow, probably suggesting that sellers are quite strong around those levels.

“Both indicators look to be flattening out and its RSI is also spoting a bearish divergence. A possible reversal perhaps?

“We believe that the upside from here is likely limited. Avoid buying now. Continue to sell on rebounds as we think that prices are likely to head back towards 53 senfirst and settle between 48 sen and 53 sen to form a strong base.

CIMB Research has technical sell on Telekom Malaysia

KUALA LUMPUR (Nov 3): CIMB Equities Research has a technical sell on Telekom Malaysia at RM4.19 at which it is trading at a FY12 price-to-earnings of 20 times and price-to-book value of 2.3 times.

It said on Thursday the fall from Telekom’s high of RM4.50 appears to be impulsive. The current rebound has taken prices back up to retest its 62%FR levels.

“The technical landscape remains lethargic. MACD has just confirmed its dead crossover while its RSI sports a minor bearish divergence signal.

“Sell into strength with a buy stop placed above RM4.33. Prices could ease back below the recent low of RM3.93-RM4.00 towards the key support trend line at RM3.75 once this rebound ends,” it said.

CIMB Research has technical sell on Public Bank

KUALA LUMPUR (Nov 3): CIMB Equities Research has a technical sell on Public Bank at RM12.70 at which it is trading at a FY12 price-to-earnings of 10.9 times and price-to-book value of 3.2 times.

It said on Thursday the recent rebound from the September lows has taken prices back up to almost its 78%FR levels. The stiff resistance at RM12.80-RM12.85 could potentially keep the bulls at bay.

“Technical landscape is still positive but both indicators are starting to weaken. Its MACD histogram and RSI appear to be flattening out.

“Traders should begin to lock in some profits after prices approaches the said resistance. A break below RM12.48 is likely to take prices towards RM11.80-RM12.05 levels in the short to medium term,” it said.

ECS IT 3Q earnings marginally lower at RM7.05 m

KUALA LUMPUR (Nov 2): ECS ICT Bhd’s earnings were marginally lower at RM7.05 million in the third quarter ended Sept 30, a 0.5% decline from the RM7.08 million a year ago.

It said on Wednesday that revenue declined 3.6% to RM317.86 million from RM329.81 million a year ago. Pre-tax profit dipped 3.1% to RM9.62 million from RM9.92 million. Earnings per share were 5.99 sen compared with 5.91 sen.

For the nine-month period, its net profit declined 4.9% to RM19.68 million from RM20.68 million while revenue also recorded a 4.9% drop to RM908.91 million from RM956.04 million.

Commenting on the 3Q results, it said sales in its ICT distribution division rose to RM206.3 million from RM204.9 million a year ago due to the increased number of notebook brands and rising demand for tablet PCs.

However, the enterprise systems segment saw a drop in revenues to RM108.2 million from RM122.8 million. Sales from the ICT services segment, however, performed better, rising to RM3.4 million from RM2.2 million.

Hong Leong Bank offers VSS

KUALA LUMPUR: Hong Leong Bank Bhd (HLBB) has launched a voluntary separation scheme (VSS) for its employees, some five months after its merger with EON Capital Bhd (EONCap).

The merger, completed on May 6, boosted its employee count to over 11,000 from about 6,000 before.

"The scheme, which is open to all permanent employees of Hong Leong Bank and MIMB (Investment Bank), is offered strictly on a voluntary basis," it said in a press statement yesterday.

MIMB was EONCap's investment banking arm. The merger propelled Hong Leong Bank to become the country's fourth largest banking group from sixth place before, with over 300 branches.

Managing director Yvonne Chia said the VSS was part of a consolidation exercise towards growing the newly-enlarged entity amid an evolving and more competitive banking landscape.

"This scheme has therefore been introduced as part of efforts to continue to enhance productivity and efficiency within the bank and also to honour the wishes of employees who have expressed their desire to further studies, change work environment, start up business, opt for early retirement and pursue personal interest, which is mutual for the bank and the employees," she added.

Stocks to watch: Guinness Anchor, Kimlun, Zelan, Glenealy

KUALA LUMPUR (Nov 3): The outcome of the US monetary policy meeting early Thursday (Malaysia time) and ongoing developments in the Greece will determine the direction of the key Asian markets on Thursday.

At Bursa Malaysia, the FBM KLCI was down 4.69 points or 0.32% to 1,470.95, but off the day’s low of 1,457. However, the key Asian markets were mixed.

Among the stocks to watch are GUINNESS ANCHOR BHD [] (GAB), Kimlun Corp Bhd, ZELAN BHD [] and Glenealy PLANTATION []s (Malaya) Bhd.

GAB’s earnings rose 42.6% to RM55.21 million in the first quarter ended Sept 30, 2011 from RM38.69 million a year ago, as it recorded higher sales and share gains in the domestic malt liquor market.

Revenue rose 21.2% to RM444.62 million from RM366.63 million while earnings per share were 18.28 sen compared with 12.81 sen.

Kimlun plans to venture into the property development with the proposed acquisition of 17.2 ha of agricultural land in Negeri Sembilan for RM27.36 million. It proposes to build factories on the land, once it had received approval from the authorities for the conversion.

Loss-making Zelan Bhd has won a bid to develop the International Islamic University Malaysia's Centre for Foundation Studies in Pahang.

It was selected by the Public Private Partnership Unit of the Prime Minister's Department to implement Phase 3 of the centre's development in Gambang, Pahang.

Glenealy’searnings jumped 165% to RM19.01 million in the first quarter ended Sept 30, 2011 from RM7.41 million a year ago but it was cautious on the outlook for palm oil price.

It said on Wednesday its pre-tax profit was RM31.55 million, up 122% from RM14.20 million. Its revenue increased by 68.2% to RM17.67 million from RM42.60 million while earnings per share were 16.67 sen compared with 6.50 sen

However, when compared with the preceeding quarter, the financial results showed a decline.

MAH SING GROUP BHD [] is teaming up with Thailand's largest retail developer Central Pattana plc to look into the proposed development and management of a shopping mall in Icon City, Petaling Jaya.

Mah Sing said on Wednesday, its unit Sierra Peninsular Development Sdn Bhd had signed an MoU with Central Pattana to exchange general information to look into the shopping mall project via a joint venture and/or partnership.

DRB-HICOM BHD [] plans to establish a medium term note sukuk programme of up to RM1.80 billion in nominal value to finance working capital requirements, projects and refinance borrowings.